Legal and Policy Directions for
Biofuels
Proposed Federal Renewable Fuels Regulations
Helen Ryan
Biofuels: Legal and Policy Dimensions
Executive Director, Oil Gas &
Alternative Energy
The Law Foundation of Ontario
Environment Canada
Toronto, Ontario
June 17, 2010
Page 1
The Federal Renewable Fuels Strategy is
led by the Minister of Agriculture
It’s drivers are:
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Reducing greenhouse gas emissions from fuel use
Encouraging greater domestic production of biofuels
Accelerating the commercialization of new biofuels technologies
Providing new market opportunities for agricultural producers and rural
communities
There are four key elements to the Strategy:
1.
2.
3.
4.
Regulations to require renewable content (Environment Canada)
Support for farmer participation through $20 million Biofuels Opportunities for
Producers Initiative and $200 million ecoAgricultural Biofuels Capital Initiative
(Agriculture and Agri-Foods )
Production incentives under the $1.5 billion ecoENERGY for Biofuels
program to encourage investment in biofuels industry and increase annual
domestic production capacity (Natural Resources Canada)
Support for next generation technologies through a $500 million NextGen
Biofuels Fund™ for large scale demonstration facilities (Sustainable
Development Technology Canada)
Page 2
The strategy will help increase production,
create jobs and address climate change
• Incentives/capital assistance have helped stimulate industry development
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Canadian plants now have capacity to produce about 2/3 of the required 2.2 billion
litres of ethanol; biodiesel capacity is further behind
• Increased production should result in roughly 8500 direct and indirect jobs, new
markets for farmers and new opportunities for rural communities
• Requiring renewable fuels will help reduce GHG emissions
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Next generation technologies will result in greater GHG emission reductions and
pave the way for a broader bio-based economy
• Federal leadership may have helped stimulate provincial action – provinces west
of Quebec have incentives and mandates announced or in place
• The federal regulations will help create a market and provide assurance
producers need to access financing
Page 3
The proposed Renewable Fuel Regulations
were published April 10th
• Regulatory approach and key elements are consistent
with previous Government decisions and
announcements
• The regulations would require petroleum fuel producers
and importers to have an average renewable fuel
content of at least 5% based on the volume of gasoline,
commencing in September 2010
• There are provisions for a 2% average renewable fuel
content requirement in diesel fuel and heating oil, to be
implemented by 2011 or earlier subject to technical
feasibility
Page 4
The Regulations will be made under the Canadian
Environmental Protection Act, 1999
• CEPA 1999 provides authority for the regulation of
sellers, producers and importers of fuel
• Amendments were made to CEPA 1999 in 2009 to
provide additional authorities needed to make efficient
national regulations requiring renewable content in
Canadian fuels:
– Authority to regulate at point of blending
– Authority to track exports
– Exemption for small volume producers / importers
Page 5
The Regulations are a key element of the
Government’s Renewable Fuels Strategy
• They will fulfill the commitments to reduce GHG
emissions from liquid petroleum fuels and create a
demand for renewable fuels in Canada
• The objective of the Regulations is to reduce GHG
emissions
– Estimated reduction of about 1 Mt CO2e per year
• The Regulations promote an integrated and nationally
consistent approach to achieve significant reductions in
GHGs
Page 6
The regulations provide a national
approach to requiring renewable content
• Canada has a policy to generally align vehicle, engine
and fuel standards with those of the U.S.
• General approach is based on U.S. Environmental
Protection Agency Renewable Fuel Standard, with some
simplifications
– The renewable fuel requirement applies to the
volume of petroleum fuel produced and imported
– Tradable compliance units are the basis for
complying with the regulations
Page 7
Feasibility of renewable diesel use under
Canada conditions is being assessed
• The Renewable Diesel Demonstration Initiative (NRDDI)
is addressing industry and end-user questions about
renewable diesel use under Canadian conditions
– Administered by Natural Resources Canada who contributes up to
50% of the total project costs
• Issues being addressed include:
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Cold temperature operability
Long term storage stability
Interaction with seasonal variations of ULSD
Materials/engine compatibility
Distribution and storage infrastructure
• Complete results are expected in mid 2010
• 2% diesel mandate will be implemented if demonstration
results are positive through an amendment to the
regulation, implementation targeted by 2011 or earlier
Page 8
Regulatory compliance to be on a
company basis
• Required renewable fuel content to be based on the
volumes of gasoline, diesel fuel and heating oil that a
company produces or imports
• Regulations not to apply to individual facilities or
provinces of import
Page 9
The regulations are to be based on
annual volumes
• Not every litre of gasoline, diesel fuel and heating oil
produced or imported would be required to contain
renewable fuel
Page 10
The regulations are to include a credit and
trading system
• Companies may acquire credits from other parties in
lieu of having renewable fuel content in their gasoline
and distillate pools
• Credits may be created by:
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Blending renewable fuel into petroleum fuel
Importing fuel with renewable content
Producing fuel from bio-crude
Use of neat renewable fuel
Page 11
The regulations include a number of
flexibility mechanisms
1.
Limits are annual, not per-litre
10.
Gasoline and distillate for use in the Territories and
Quebec above 50o N may be excluded from the
regulated pool
2.
Limits are company-wide
3.
Compliance units may be traded
11.
Gasoline for use in Newfoundland & Labrador and
Quebec above 50o N may be excluded from the
regulated pool
4.
A broad suite of liquid renewable fuels may be
used
12.
The first compliance period is extended to 16
months
13.
Definition of “renewable fuel” encompasses small
amounts of non-renewable components
14.
Distillate compliance units created before the
distillate requirement comes into effect may be
carried over into first distillate compliance period
Compliance units may be created from use of biocrude feedstock or neat renewable fuels
15.
There is a 90-day trading period following the end
of a compliance period for “truing-up”
8.
Small volume (< 400 m3) producers and importers
are not subject to requirements
16.
Some excess compliance units may be carried
forward to the next compliance period
9.
Fuel for special uses may be excluded from the
regulated pool
17.
Compliance units created during a “true-up” period
to be used for compliance during the previous
compliance period
5.
6.
7.
Compliance units may be created from use of
renewable fuel in any liquid petroleum fuel
Distillate compliance units may be used to meet
the 5% gasoline requirement
Page 12
The regulations will not include:
• Regional requirements
• Fuel quality specifications
• Differential weightings (biases) assigned to renewable
fuels
– Differential weightings may be considered in the future once
there is a better knowledge base on the life cycle analysis of
various fuels.
Page 13
Estimated costs and benefits of the
proposed Regulation
• 5 % renewable requirement will reduce GHG emissions
by one tonne per year
• Based on CO2 price of $25 per tonne, benefits
estimated at $581 million over 25 years
• Costs estimated at $3 billion over the same period
• To make fuels regulations under the Fuels Division of
CEPA 1999, Governor in Council must be of the opinion
that the regulation could make a significant contribution
to the reduction in air pollution
Page 14
Status and Next Steps
• Proposed regulations were published in the Canada
Gazette, Part I on April 10th
– 60 day comment period concluded June 9th
• Submissions are being reviewed, with publication of final
regulations in the Canada Gazette, Part II targeted for
later this summer
• 5% requirement for gasoline to take effect September 1st
• 2% requirement for diesel fuel and heating oil to be
implemented by 2011 or earlier, subject to technical
feasibility
– National Renewable Diesel Demonstration Initiative to inform decision
on technical feasibility this summer
– Implementation requires amending the new regulation
Page 15